Abstract
In this study, we examine the relation between employee lawsuit and risk in U.S. public firms. We hand collect more than 20,000 employee lawsuits and find that labor-related allegations significantly affect firm risk after controlling for various firm characteristics. We document that a greater number of employee litigation increases firm risk. Our results remain robust when we use alternative measures of employee lawsuits, including other work-related complaints, violations, disputes, and allegations. Our study reveals that case characteristics - charging parties, outcomes, and duration - play a significant role in defining the firm risk. Our results show the importance of employee treatment which may have important implications for policy makers and business owners.
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